i know they dont write conversion cost but they write labor its the same thing correct, as far as the units involve is it total to 1,200,000 accounted for can you help me with this problem, please
You are employed by Spirit Company, a manufacturer of digital watches. The company’s CFO has asked that you determine the costing information for past year. You have the following information available to you to complete this process.
Materials are added to production at the beginning of the manufacturing process, and overhead is applied to each product at the rate of 60% of direct labor cost. The ending WIP inventory is 50% complete as to conversion costs. There was no Finished Goods inventory at the beginning of the year (all prior year finished goods were sold) and 200,000 units at the end of the current year. A review of Spirit’s inventory and cost records has disclosed the following data:
Costs
Units Materials Labor
WIP, January 1 (conversion 80% complete) 200,000 $200,000 $315,000
Units started into production 1,000,000
Costs added during the year:
Materials cost $1,300,000
Labor cost $1,995,000
Units completed during the year 900,000
The company uses the weighted average method.
Required
Determine the equivalent units and costs per equivalent unit for
materials and conversion costs.
What are the ending cost balances in the WIP and Finished Goods
inventory?
Determine the cost of goods sold for the year (assume no over- or
under-applied overhead).
UNITS TO ACCOUNT FOR: | ||||||
Beginning Work in Process units | 200,000 | |||||
Add: Units Started in Process | 1,000,000 | |||||
Total Units to account for: | 1,200,000 | |||||
UNITS TO BE ACCOUNTED FOR: | ||||||
Units started and completed | 900,000 | |||||
Ending Work in Process | 300,000 | |||||
Total Units to be accounted for: | 1,200,000 | |||||
Equivalent Units: | ||||||
Material Cost | Conversion | |||||
% Completion | Units | % Completion | Units | |||
Units started and completed | 100% | 900,000 | 100% | 900,000 | ||
Ending Work in Process | 100% | 300,000 | 50% | 150,000 | ||
Total Equivalent units | 1,200,000 | 1,050,000 | ||||
TOTAL COST TO ACCOUNT FOR: | ||||||
Material | Conversion | |||||
Beginning work in Process | 200,000 | 504,000 | ||||
Cost Added during May | 1,300,000 | 3,192,000 | ||||
Total Cost to account for: | 1,500,000 | 3,696,000 | ||||
Total Cost to account for: | 5,196,000 | |||||
COST PER EQUIVALENT UNIT: | ||||||
Material | Conversion | |||||
Total cost added during the year | 1,500,000 | 3,696,000 | ||||
Equivalent Units | 1,200,000 | 1,050,000 | ||||
Cost per Equivalent unit | 1.25 | 3.52 | ||||
TOTAL COST ACCOUNTED FOR: | ||||||
Units Completed (21500 units) | ||||||
Equivalent unit | Cost per EU | Total Cost | ||||
Material | 900,000 | 1.25 | 1125000 | |||
Conversion Cost | 900,000 | 3.52 | 3168000 | |||
Cost of Units completed | 2537000 | |||||
Ending WIP (3400 units) | ||||||
Equivalent unit | Cost per EU | Total Cost | ||||
Material | 300,000 | 1.25 | 375000 | |||
Conversion Cost | 150,000 | 3.52 | 528000 | |||
Cost of Ending work in process | 903000 | |||||
Note: Overheads in Beginning WIP: $315000*60% = $189000 | ||||||
Therefore, Convesion cost in Beginning WIP= $315,000+189000 = 504,000 | ||||||
Overheads in Curren cost: $ 1995000*60% = 1197,000 | ||||||
Conversion cost of current year: $1995000+1197000 = $ 3192000 | ||||||
Req 1: Equivalent units: | ||||||
Material: 1200,000 Units | ||||||
Conversion: 1050,000 units | ||||||
Cost per equivvalent units: | ||||||
material: $ 1.25 pepr EUP | ||||||
Conversion: $ 3.52 per EUP | ||||||
Req 2: Cost of Ending WIP: $ 903,000 | ||||||
Req 3: Cost of goods sold: | ||||||
Units produced: 900,000 | ||||||
Ending Units Inventory: 200,000 | ||||||
Sold units: 900,000-200,000 =700,000 | ||||||
Cost per unit: $ 4.77 per unit (1.25+3.52) | ||||||
Cost of goods sold: 700,000 [email protected]= $3339000 |
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